What is a building? Section 5 notices and right to first refusal following SGL 1 Ltd v FSV Freeholders Ltd & Others [2025]

Richard Pulford, Senior Associate Solicitor in the Dispute Resolution team, looks at what constitutes a building when a section 5 notice is required when disposing of a block following the decision in SGL 1 Ltd v FSV Freeholders Ltd & Others [2025]

Section 5 notices and right to first refusal

Notices pursuant to section 5 Landlord and Tenant Act 1987, more commonly referred to as the tenants’ right of first refusal, have long been a bane of the lives of landlords and freeholders trying to get through a deal quickly. It relates to the process when a freeholder is selling or ‘disposing’ of a building, the need to give the existing tenants an offer for them to purchase the property at the amount which the prospective buyer needs to pay. This means that the selling party should not be out of pocket because they will be getting the same amount either way, however, it is often viewed as an unnecessary procedural step which slows down transactions even when in some cases, there is no chance that any of the tenants are going to group together to match the offer made. This disdain is often not helped by the lack of clarity as to exactly what is required and the serious ramifications for getting it wrong. Under the Act, the term ‘building’ is not specifically defined, meaning that often landlords and their legal advisers are left advising more on a worst-case scenario basis rather than being able to categorically advise what the legal position is. Multiple blocks can be considered part of the same building. This is where SGL 1 Ltd v FSV Freeholders Ltd & Others offers welcome clarity on at least one part of the process.

SGL 1 Ltd v FSV Freeholders Ltd & Others [2025]

This case involved a group of blocks in a residential development. As part of the section 5 notice procedure, it was assumed that the various blocks consisted of 2 buildings. Firstly, block A and the blocks B, C and E. Two notices were therefore served.

The court determined that there are many factors that go into what would constitute a building for the purpose of serving notice. These include, but are not limited to, the original plans, the tenant’s ability to access parts of the other blocks, connections between the blocks at any level, service charge structure, common access points and common areas.  One of the main factors in this particular case was that parking spaces accessed via shared access for block A were situated in front of blocks B and C. This pointed to a holistic arrangement and that the four blocks constituted one ‘building’ for the purposes of the section 5 provisions. This ultimately meant that in serving the two notices, each was invalid, and it should have been one notice encompassing all the blocks.

Implications

This is another example of a landlord doing what they suspected to be correct only to found out that the assessment made in good faith was incorrect. In this case however, their error affords legal advisors more information to assess similar cases in the future. Whilst this certainly does not make the entire section 5 process absolutely clear, it does gather more information as to factors that will be taken into account when determining what may be considered a building in future. 

If developers or freeholders require assistance with the process and the mechanisms of serving a section 5 notice, we can be contacted at [email protected].